London: Crude oil prices softened on Friday as traders assessed indications that Gulf nations and Iran were nearing an interim arrangement to reopen the Strait of Hormuz, a step intended to make room for wider negotiations to end the war with Iran. By 1141 GMT, Brent crude futures had slipped 75 cents, or 0.9 percent, to USD 81.74 a barrel, while US West Texas Intermediate (WTI) futures were 66 cents lower, or 0.9 percent, at USD 76.63.
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The pullback followed a sharp rally in the previous session, when oil futures closed more than USD 3 a barrel higher on Thursday as Iran considered legislation to bar US and Israeli ships from the strait. Roughly one-fifth of the world's oil and Liquefied Natural Gas (LNG) moved through the waterway before the conflict erupted at the end of February.
Earlier in the week, prices had retreated as prospects for resolving the conflict brightened, and both benchmarks were heading for a weekly decline of around 9 percent. Even so, analysts cautioned that recent developments suggested the standoff between Tehran and Washington was far from settled.
A senior Iranian official said Tehran wanted charges of between 5 and 7 percent of the value of cargoes passing through the strait. Oman is reportedly weighing fees of roughly 3 percent, while Washington is pushing for none at all. According to four industry sources, reported Reuters, the proposed arrangement would be difficult to implement given US sanctions and the restrictive insurance terms attached to any such payments.
"The structure of the Iran-Oman agreement in its current form and the power it yields to Iran is nothing that (US President Donald) Trump can accept politically," said Bjarne Schieldrop at SEB Research. "Trump would face heavy political criticism at home if he did."
Vandana Hari, founder of oil market analysis firm Vanda Insights, said that while the week's signals had sent market sentiment swinging wildly, it remained unclear what conditions would need to be met for any agreement to be finalised.
Separately, a senior Saudi official said Riyadh anticipated imminent, coordinated assaults from Iraqi militias to its north and Yemen's Houthis to its south, orchestrated by Iran's Islamic Revolutionary Guard Corps. An official was quoted as saying that intelligence shared by Saudi Arabia, the United States and other regional states pointed to possible strikes on civilian and economic targets, among them energy facilities, ports and airports.
The Houthis said they had launched missile and drone strikes on Saudi positions in Marib and Hadramout in Yemen on Thursday.
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In a show of unity among Sunni Muslim US allies rattled by the widening crisis, Saudi Arabia, Pakistan and Turkey signed a joint defence pact in Mecca on Friday. Trump told reporters on Thursday that he expected the war to end soon.
Markets are now looking ahead to US payrolls data due later on Friday, which may indicate the Federal Reserve's stance on interest rates. Elevated rates push up consumer costs, potentially slowing economic growth and denting oil demand.